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SPECIAL NEEDS CONT’D
A Practical Option
Protecting Personal-injury Settlements with a Special-needs Trust
By SEUNGHEE CHA
When plaintiffs of medical mal- practice or catastrophic accidents receive awards in personal-injury lawsuits, their settlement must be handled properly to provide for their long-term needs.
Personal-injury settlements are commonly received as a structured settlement or a lump- sum award. A structured settlement is a contract with the defendant-insured’s insurance compa- ny under which regular, ongoing payments are made for a period of time. These payments are called annuities, and for young plaintiffs they are typically designed to be for the plaintiff’s lifetime. With a lump-sum award, the plaintiff receives the settlement in one full payment at once.
One of the advantages of a structured settle- ment is protection against depletion of the settlement, which could happen in the hands of relatives who face financial difficulties. Also, a steady source of income can safeguard against bad investment decisions. In recent years with low interest rates, however, structured settle- ments have become less appealing because the return on the annuity payments is locked into the prevailing interest rate at the time of the agreement.
A lump-sum award, which is paid to the plaintiff all at once, allows for more investment flexibility. Also, it is more appropriate for plain- tiffs who need access to larger funds to pay for big expenses, such as the cost of remodeling to make necessary accommodations for the home, special equipment or a specialized vehicle, or educational and rehabilitative expenses.
A major drawback of a structured settlement or a lump-sum award, however, is that it could result in the loss of financial eligibility for various means-tested government benefits. If the plaintiff has a disability, whether resulting from the underlying personal-injury claim or
due to an existing condition, it is imperative to carefully evaluate whether the plaintiff receives means-tested government benefits that impose asset or income limits.
Two such essential benefits are federal and state Medicaid programs, which pay for a vari- ety of medical care and community-based sup- port and habilitative services, and Supplemen- tal Security Income (SSI), a cash benefit to help cover the basic necessity of food and shelter.
For plaintiffs with disability who anticipate a personal-injury settlement and who need to maintain eligibility for important means-tested government benefits, the best solution may
be a self-settled supplemental-needs trust, also known as a ‘first-party’ or (d)(4)(A) trust — re- ferring to the federal statute that permits this type of trust, 42 U.S.C. § 1396p(d)(4)(A). (The terms ‘supplemental-needs trust’ and ‘special- needs trust’ are interchangeable.)
The self-settled supplemental-needs trust makes it possible for the plaintiff to preserve means-tested government benefits and also to retain access to the personal-injury settlement. To achieve this result, the law requires transfer of the settlement to the trust designed for the primary benefit of the trust beneficiary; upon termination of the trust or the death of the ben- eficiary, the remaining trust assets must be used to reimburse the Commonwealth of Massachu- setts, and any other state that provided Medic- aid benefits, during the beneficiary’s lifetime. (Due to this reimbursement requirement, the trust is referred to as a ‘payback’ trust.)
The trust is intended to be used to pay for goods and services that are not covered by
the trust beneficiary’s available government benefits for the purpose of enhancing the ben- eficiary’s quality of life by supplementing, not supplanting, government benefits. Examples of distributions include payment for therapy,
professional services, travel and recreation, education and vocational training, and assistive technology.
The trust requires a ‘trustee’ to carry out the responsibility of administering the trust, which involves the duties of prudent investment, proper asset management, administrative tasks — e.g., recordkeeping, accounting, filing of tax returns, and payment of taxes — and distribu- tions for the benefit of the beneficiary. An effec- tive trustee maintains adequate communication with the beneficiary, and the beneficiary’s legal representatives and agents, to determine the beneficiary’s needs. Also, the trustee must learn to navigate the rules of the relevant govern- ment benefits to understand how trust distribu- tions interact with these benefits and for the purpose of avoiding adverse consequences that could reduce or eliminate the benefits.
In many cases, a responsible, trustworthy relative can be a suitable choice of trustee. Depending on the size of the settlement, the government benefits involved, and the complex needs of the beneficiary, a corporate trustee, including a certified nonprofit corporation (called a ‘pooled trust,’ which derives its name from the practice of pooling together all benefi- ciary trust accounts for investment), may be a better option to ensure that the trust is properly administered.
Before choosing between a structured settle- ment or a lump-sum award, plaintiffs anticipat- ing a settlement should seek the advice of an experienced attorney to determine whether a self-settled supplemental needs trust is appro- priate. It could make a world of difference. v
Seunghee Cha is a partner at Bulkley Richardson and a member of the firm’s Trusts & Estates and Special Needs Planning practice groups; (413) 272-6200.
Mercy Physician Offers Cutting-edge Approach to Vascular Diseases
SPRINGFIELD — Mercy Medi- cal Center is the first hospital in the area to offer a new treatment option for patients suffering from blockages in the leg arteries. The procedure uses shockwave tech- nology to dilate heavily calcified blockages or lesions, often correct- ing the condition without the need for a stenting device.
An alternative to traditional an- gioplasty, the shockwave technol- ogy procedure minimizes surgical trauma and provides better patient
outcomes. Locally, the procedure is offered exclusively by Dr. Mah- moud Abdelghany of Pioneer Val- ley Cardiology Associates at Mercy Medical Center.
The shockwave technology uses a balloon-catheter system designed to deliver a lithotripsy device through the peripheral arterial system of the lower extremities to the site of an otherwise difficult-to-treat calcified stenosis. During the procedure, the lithotripsy device generates pulsat- ing mechanical energy within the
targeted treatment site, breaking down calcium within the lesion and allowing subsequent dilation of a peripheral artery stenosis using low balloon pressure.
“This type of technology has long been used to treat patients with kid- ney stones,” Abdelghany said. “This procedure is a tremendous break- through for patients suffering from calcified peripheral artery disease because it allows for the controlled expansion of the affected area and reduces the risk of complications
and the need for stenting.”
He and his colleagues were the
first in the world to use the shock- wave technology in the treatment of chronic venous thrombosis, which causes chronic leg swelling and pain.
Abdelghany is board-certified in internal medicine, cardiovascular disease, nuclear cardiology, echo- cardiography, and vascular diseas- es. For more information, call (413) 732-1928 or visit www.pvcardiology. com/pvcardiology.